This Off-Price Leader is All Set to Cash in on the Holiday Season
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
TJX has come out as a retail winner with its flexible off-price business model that allows the company to act according to the market trends. With the coming holiday season, TJX will continue to sell designer clothes and home goods at discounted prices as compared to the department stores.
Its specialty in providing the right product to the right store at the right time has made TJX a leader in the apparel and home fashion markets around the world. As compared to traditional retailers, it has a low-cost structure and it remains focused on reducing expenses across all its segments.
TJX generates almost 3x sales against its close competitor Ross Stores (ROST). The company also leads in terms of the number of stores as it has; 2,743 locations from 8 different chains, while Ross operates just two different chains with only 1,005 locations. Meanwhile its other competitor, Kohl’s Corporation, also has only 1,146 stores. Additionally, the company has been able to outperform its peers in the last year. TJX has shown share growth of 34%, while it’s other peers Kohl's Corp & Ross Stores have shown growth of only 6.2% and 13.6%, respectively.
Let’s have a look at the performance of these companies in the last quarter:
Source: Yahoo! Finance
TJX has been a leader in the industry, and seems a long term buy with these underlying factors taken into consideration:
Broader Demographic Market:
TJX has seen a huge gain in traffic in the recent past, which is reflected in its increased quarterly earnings. With an improved marketing strategy, it is attracting more new customers and also expanding its demographic by targeting the younger age group of 18-35 year old consumers. TJX is quickly becoming a versatile fashion resource company.
International Store potential:
The company currently operates in the UK, Ireland, Poland, and Germany, and sees long term potential in its store expansion with an almost 50% increase with its current banner and new geographies. It hopes to open ~850 stores in Europe (there are presently ~400 there) and 430 stores in Canada (compared to 324 at present). In Canada its 14 Marshall Stores are performing above expectations, and the company expects the potential for ~100 Marshall Stores to be established there soon. The company is entering these markets with its off-price strategy, in which the company has market leadership.
TJX is positioning its business for continued growth and success with its investment in E-commerce, which is expected to be a profitable avenue of growth. In fact, the company is building a team of e-commerce experts. The site will expand the store presence by enabling the company to offer a wide range of products. Moreover, it will open a great landscape of new categories. This feature will improve its support for its stores through multi-channel retailing, and will also increase its consumer base. The expected revenue with the launch of an e-commerce website in 2014 is likely to be around $1 billion.
TJX is looking to strengthen its sales in the upcoming holiday season, as the company is optimistic about its gift giving selection, efficient marketing spending, and fresh inventory. More marketing campaigns will be seen compared to the last holiday season. The company will have good traffic opportunities, as throughout the holiday season it will ramp up its new seasonal offerings. This will provide incremental upside to the company in future.
Summing up, I would say that TJX can drive positive traffic comps in 2013 with the company's value proposition. The company has seen success in driving new consumers, particularly from the younger generation. With its off price strategy it has opportunistic buys, as consumers reject higher prices at the traditional retailers. TJX is an out performer compared to other apparel sector retailers, and a very successful company with tons of opportunities to move ahead.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!